Bloomberg News

Japan’s 2-Year Debt Sale Demand Strongest Since June 2005

May 29, 2012

Japan’s auction of 0.1 percent two- year notes drew the strongest demand since June 2005 even after technical difficulties delayed the sale by 2 1/2 hours.

The Ministry of Finance’s 2.5 trillion yen ($31 billion) sale drew bids worth 9.79 times the amount of debt on offer. Bank of Japan (8301) staff members involved in the process had entered incorrect bid ceilings for some dealers, causing system errors, the central bank told reporters. This was the first problem at an auction since December 2008, the bank said.

It was the first sale of 2-year notes since the Bank of Japan on April 27 added 10 trillion yen to its planned purchases of government debt and extended the maximum maturity of notes bought to three years, from two years.

“The two-year auction results were unmistakably solid,” said Jun Kawakami, a market economist at Mizuho Securities Co., one of the 25 primary dealers obliged to bid at government offerings. “Market participants are very confident in the demand-supply situation in shorter-term securities, so the delays due to technical difficulties didn’t have any impact.”

Two-year yields have been unchanged at 0.095 percent since May 16, according to Japan Bond Trading Co., the nation’s largest interdealer debt broker. Ten-year rates dropped 2 1/2 basis points to 0.85 percent from yesterday, while 20-year yields declined three basis points to 1.65 percent.

The new notes will be issued on June 15. The securities had a lowest accepted price of 100, higher than the median estimate of 99.995 in a Bloomberg News survey of 14 traders.

“For those who expect additional monetary easing, a 0.1 percent note is still a buy,” said Tomohisa Fujiki, an interest-rate strategist at BNP Paribas Securities Japan Ltd. in Tokyo.

To contact the reporters on this story: Yumi Ikeda in Tokyo at yikeda4@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net

To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net


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